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Strategies & Market Trends : Waiting for the big Kahuna

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To: Investor2 who wrote (10216)	11/23/1997 8:13:00 AM
From: bearshark	of 94695

Investor2: I read all the FOMC minutes for the past two years a couple of weeks ago. What I picked up from reading them was the FOMC's sensitivity to the possibility of wage increases making their way into the CPI some day. This is why they are now biased toward higher rates. Currently, they do not see it occurring but they are concerned about the possibility. They are very sensitive to this issue and it made me think that the members of the FOMC remember the early 80s. There is one thing that we can think about for the coming year. Someone mentioned it on one of the SI threads and it is also mentioned in the FOMC minutes. There was a discussion that wage increase were kept under control by the use of non-wage compensation--options to purchase stock at a designated price. Suppose we have a flat stock market. Can these options be used as compensation? If not, what will the workers require instead? Wages. If wages increase, could the CPI increase? Because of the FOMC's sensitivity to the wage issue, I would expect them to move quickly against it if they sense it is happening.

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